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Strategic Sourcing and Procurement
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Total Cost of Ownership (TCO)
TCO is the purchase price of an asset plus the costs of operation. When choosing among alternatives in a purchasing decision, considering the TCO is important as it gives a more comprehensive assessment of long-term cost efficiency.
Economies of Scale
Economies of Scale refer to the cost advantage that arises with increased output of a product. Procurement can leverage scales to negotiate better terms with suppliers.
Supplier Evaluation
Supplier Evaluation is the process of assessing and approving potential suppliers by quantitative and qualitative assessments. Strategically, it ensures a reliable and high-quality supply base.
Risk Management in Procurement
Risk Management in Procurement involves identifying, assessing, managing and mitigating potential risks in the supply chain. It is crucial for ensuring business continuity and operational resilience.
Supplier Relationship Management (SRM)
SRM is the discipline of planning and managing all relationship types with vendors. It holds strategic importance for optimizing performance and value from partners.
Procure-to-Pay (P2P) Process
The P2P process encompasses all the steps involved from purchasing goods and services to paying for them. It is critical for operational efficiency and ensuring sound cash flow management.
Just-In-Time (JIT) Inventory
JIT is an inventory strategy companies employ to increase efficiency and decrease waste by receiving goods as they are needed, reducing inventory costs. Strategic use of JIT can improve cash flow and reduce waste.
Category Management
Category Management is a strategic approach that organizes procurement resources to focus on specific areas of spends. It is crucial for enhancing profitability and efficiency in the purchasing process.
Strategic Sourcing
Strategic Sourcing is a process of developing channels of supply at the lowest total cost, not just the lowest purchase price. It integrates purchasing decisions with business strategy.
Bulk Buying
Bulk Buying involves purchasing large quantities of a product to benefit from volume discounts and reduced costs. Although it can offer savings, balancing inventory and cash flow impacts its strategic value.
Make or Buy Decision
This decision determines whether an organization should manufacture a product in-house or purchase it from an external supplier. It impacts a company's strategic positioning and focus on core competencies.
Contract Management
Contract Management is the management of contracts made with customers, vendors, partners, or employees. It's strategically important for ensuring compliance and performance from procurement contracts.
Spend Analysis
Spend Analysis involves collecting, classifying, and analyzing expenditure data with the purpose of decreasing procurement costs and improving efficiency. It informs strategic sourcing and budgeting.
Sustainable Procurement
Sustainable Procurement involves making purchasing decisions that consider environmental and social factors. It is strategically important for corporate responsibility and long-term viability.
Request for Proposal (RFP)
An RFP is a document issued by a company asking vendors to submit a proposal for a specific product or service. It is strategically important as it helps in collecting detailed information and competition fostering among suppliers.
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